Posts tagged “oil reserves”

Petroleos Mexicanos (PEMEX), the fourth-largest oil producer in the world, has announced that it has discovered a crude oil deposit that could provide as much as 1 billion barrels by the time exploration and extraction is complete.

More than 500 million barrels are estimated to lie beneath the original well site, dubbed Navegante 1, at a depth of nearly 4 miles, with another 500 million barrels expected to lie in surrounding areas. PEMEX, a state-run oil firm, has already spent more than $10 billion in exploration efforts, culminating in this, the largest solid-ground crude discovery made in the country in the past 10 years. (Read More: How Much Oil is Left in the World?)

I want to post a quick rant on the uselessness of statistics about a country’s oil reserves. I was preparing this afternoon to write a blog post about the revolution in oil production in the US, caused by the adoption of new technologies of fracking and horizontal drilling in areas like the Bakken Shale and the Eagle Ford Shale.

The USGS reports that, with perspective additions, the U.S. holds 32 billion barrels (bb) of oil, 291 trillion cubic feet (tcf) of natural gas, and 10 billion barrels of natural gas liquids in mean potential undiscovered reserves. This is a substantial upwards revision from last year’s estimate – showing how the new technologies are revolutionizing America’s energy outlook.

Then I started doing the math. The U.S. uses about 18.7 million barrels of crude oil equivalent per day (mbd), according to the EIA. Of that consumption, we’re importing about 8.7 mbd, and producing about 10 mbd. That works out to a total annual consumption of about 6.875 bb of oil, of which about 3.65 bb is from domestic production. At those rates, America would completely exhaust its total reserves, as estimated by the USGS at 32 bb of oil in eight years, nine months. So, by April or May of 2021, the United States would no longer have any oil – if these reserve estimates went unchanged.

Over the next two to three weeks, I am going to post a series of short articles utilizing graphics I created from the recently released 2012 BP Statistical Review of World Energy. Because I am working on the roll-out of a new product which will be geared specifically toward those with a financial interest in the world of energy (more on that in the coming days), I will take a break from my video blogs during this time, and catch up on accumulated questions after I finish this series.

World Oil Reserves Facts and Figures

The topic of this first article in the series is oil reserves. Just to review, an oil resource refers to the total amount of oil in place, most of which can’t be recovered. The proved oil reserve refers to the amount of oil that can be recovered economically with existing technology. More details can be found in Setting the Record Straight on U.S. Oil Reserves.CONTINUE»

Here I describe some interesting new research on modifying Hubbert’s model of peak oil to take into account the incentives for additional production that higher oil prices would be expected to bring.

A recent IMF Working paper by Jaromir Benes, Marcelle Chauvet, Ondra Kamenik, Michael Kumhof, Douglas Laxton, Susanna Mursula and Jack Selody begins by noting the trend in forecasts of oil production from the U.S. Energy Information Administration. In earlier years, these forecasts were primarily just extrapolations of trends in global demand, with the assumption that supply would grow as needed to meet demand. If EIA’s 2001 forecast had proven accurate, the world today would be producing about 100 million barrels of oil each day. The EIA forecast for 2012 has been revised downward in each successive year, and now stands just under 90.

EIA forecasts of total world oil production (in millions of barrels per day) for 2000-2020 as issued in consecutive years over 2001-2010. Source: Benes, et. al. (2012).

The argument which I’ve made is that a boom in natural resources production can cover up some short-sighted economic policies; in effect, the earnings from producing oil mean that countries do not have to invest in their education or produce their own manufactured goods. The other side of the argument is that it can only be a good thing for new resources to be found.

Leaving aside the question of whether natural resource wealth undermines institutions or causes corruption (and there is good evidence of a resource curse among developing countries) there is one thing that increased production of oil does, once it gets to be a big enough sector of the economy: it pushes up the value of that country’s currency.

All else equal (as economists always have to say), new production of natural resources strengthens the domestic currency. That’s because those resources are either exported or are used to replace imports.CONTINUE»

The Difference Between Oil Shale and Oil from Shale Formations

There has been some confusion lately about the overall extent of U.S. oil reserves. Some claim that the U.S. has hundreds of billions or even trillions of barrels of oil waiting to be produced if the Obama Administration will simply stop blocking development. So, I thought it might be a good idea to elaborate somewhat on the issue.

Oil production has been increasing in the U.S., primarily driven by expanding production from the Bakken Shale Formation in North Dakota and the Eagle Ford Shale in Texas. The oil that is being produced from these shale formations is sometimes improperly referred to as shale oil. When politicians speak of hundreds of billions or trillions of barrels of U.S. oil, they are most likely talking about the oil shale in the Green River Formation in Colorado, Utah, and Wyoming. Some have assumed that since we are accessing the shale in North Dakota and Texas, the Green River Formation and its roughly 2 trillion barrels of oil resources will be developed next. But these are very different types of resources. CONTINUE»

Two Sides of a Coin In a recent video blog about energy politics, I stated that in my opinion each of the major political parties in the U.S. only gets half of the energy picture. Democrats tend to demonize oil usage, with many believing that we can shift to renewables for our energy needs. To be clear, we can — but not in the way they imagine. They simply underestimate the role oil plays in our lives, and therefore overestimate the ease of a transition. As a result, they feel they have little use for oil companies, and so they are perpetually at war with the oil industry. Of course renewables certainly have a role, and must be the long-term… Continue»

The U.S., that is, in total fossil fuel resources. At least those were the findings of the Congressional Research Service in a report they just released: U.S. Fossil Fuel Resources: Terminology, Reporting, and Summary The primary reason is our huge coal reserves. While we are 12th in oil reserves (Table 5 of the report), our coal reserves are by far the largest in the world. All together, the fossil fuel reserves (oil, natural gas, and coal) of the U.S. are reported at just under one trillion barrels of oil equivalent (BOE). The global total is reported at 5.6 trillion BOE. While I think you have to take data from some of the listed countries with a grain of salt –… Continue»

Too often people try to interpret comments or actions from Saudi Arabia, without attempting to understand the issues from their perspective. I think it is a useful exercise to ask whether their specific actions or comments make sense; 1). From the Saudi perspective, and 2). In the context of the market. For example, when Saudi said that they were having trouble finding buyers for their crude in the spring of 2006, I don’t simply look at the price and dismiss those comments as lies (as many did). I do a bit of digging. And when I uncovered that OECD crude inventories were high and rising at the time, that Iran said essentially the same thing at the same time, that… Continue»